Landlords in New Zealand have been warned to be vigilant in checking potential tenants following a 50% jump in claims for damage caused by illegal drug labs.

Insurance Council of New Zealand spokesman Terry Jordan told insuranceNEWS.com.au damage caused by tenants operating methamphetamine or “P” labs have cost insurers up to $NZ10 million ($7.7 million) in the past 12 months.

He says insurers have raised concern over the extent of these losses, with a 40% to 50% increase in damage over the past two years.

“It’s getting to the stage where insurers are getting concerned,” Mr Jordan said. “It’s indicating the beginning of a systemic problem, and we are reminding landlords of their responsibility to vet tenants very carefully and carry out inspections.”

He says the “cooking” of illegal substances in P labs is leading to chemical contamination of properties and causing substantial losses.

Mr Jordan says the worst contamination occurs when “cooking” is undertaken on a regular basis.

“In the worst cases houses that are totally contaminated may need to be demolished. There have also been a number of instances of fire losses due to explosions.”

Mr Jordan says lab producers often feed their habit though burglary, car theft and other crimes.

Police have also alerted neighbours to look out for signs of clandestine labs such as houses or buildings smelling of chemicals, exhaust fans running at odd times, blacked-out windows or curtains continually closed.